Sanctions Begin To Inflict Real Economic Pain In Iran

ROBERT SIEGEL. HOST: The aim of international sanctions against Iran is to inflict so much economic pain that the Tehran government will eventually back off its nuclear program rather than sink deeper into poverty. So far, there is no indication that the sanctions have led to a nuclear policy re-think by the Iranian leadership.

But as for inflicting economic pain, that appears to be very real. The government there says inflation is running at over 30 percent a year and some independent observers say that's an understatement.

Reporter Thomas Erdbrink covers Iran for the New York Times. He's lived there for the past 11 years. This week, he happens to be back in California and joins us once again. Hi.

THOMAS ERDBRINK: Hi.

HOST: And tell us, for people who are in Iran doing shopping, trying to get by week to week, how painful is it?

ERDBRINK: Well, it is very painful if the carton of milk you by one week is almost doubled the price the next week. Products ranging from food staples all the way up to locally made cars has just tripled in price over the last year. So it's a very disturbing situation for normal Iranians.

ROBERT SIEGEL, HOST:

And we talked about this a few months ago. Since the fall, say, the difference is palpable?

ERDBRINK: Not that much. I mean, Iranians are used to high levels of inflation. And this is also very interesting when you try and look at the effects of the sanctions. When we look at the cold hard figures, inflation is probably much higher even than 30 percent; some people say 50, some people say 100 percent depending from when start to compare.

What really matters is that when you visit Tehran, when you drive to Tehran, you don't see the visual effects of this inflation. You still see billboards promoting the latest laptops. All the streetlights are working. So, yes, when you look at the statistics, Iranian economy is in very deep trouble. But when you look at actual day-to-day effects of the inflation, at this point at least, it's not that people are ready to go out on the streets in protest against the government, or for the government to rethink their nuclear policy.

SIEGEL: Do you get the sense that Iranians regard the inflation rate or the collapse of their currency, or the inaccessibility of foreign goods, that these are problems that their government could and perhaps should solve? Or do you hear them blaming the U.S., the U.N. or Israel for all these problems?

ERDBRINK: I guess they blame both parties. But, first of all, they would blame their own government. The popularity of the nuclear program among normal people has definitely dropped. Because in the last 10 years, people are facing these sanctions, they're facing inflation, they're facing other economic troubles, and they are seeing nothing in return.

Iran's only nuclear power plant in Bushehr still hasn't even gone online after all these years. It's not providing energy to any part of the country. The popularity of the nuclear program is definitely down and the people are increasingly wondering why is there no room for compromise from their government.

But that said, it's not as if people have a lot of influence on the government or the state's nuclear policies. They feel victimized partly by the government and also by the U.S. government. And they feel caught in the middle. I mean, what can they do? They have no influence. That's how they feel.

SIEGEL: Back in the 1990s, when there were very tough sanctions against Iraq, it was said that people who were well-wired and had good connections profited from them, and the middle class of Iraq was hardest hit. Do you see something like that happening in Iran?

ERDBRINK: Definitely. And the middle class and normal average people that want to send their children to a university and are striving for a better life are really hardest hit by this. You can see them down-scaling their lives, renting out smaller apartments just in order to try and upkeep a certain standard of living.

At the same time, there is a new class emerging in Iran, which is well-connected, has access to foreign currency, and is really living it up. They are buying Lamborghinis. Porsche has been selling more cars in Iran than they have done all over the Middle East and over the last two years. So, they are very visible in Iran and they are definitely profiting from these sanctions.

SIEGEL: Well, Thomas Erdbrink, thanks for talking with us once again.

ERDBRINK: Thank you, Robert.

SIEGEL: Thomas Erdbrink, who happens to be in California this week, covers Iran for the New York Times. And we were talking about the effects of sanctions in that country.

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